A) Education is a life-long investment in yourself, collateralized against your life-long working income. Hence going backrupt today does not mean that one could not repay the debt over ones remaining working life, and it should not be a 'convenience' by which one can absolve ones debt obligation. Education loans are unique; the education cannot be seperated from you, and sold to offset the debt.

This is a fair point however other asset types do have bankruptcy protections. Obviously this is more difficult with "education" (what is the appropriate amount/how to value it), however it can be done or at least be triangulated. You could find an average payback period per degree type and average earnings or net worth per degree and use that to determine a period of time after which one can discharge the loan in bankruptcy.

For example if a legal degree has outstanding principal of 200k, has an average payback period of 12 years, and after graduation the average lawyer has net worth of +200K after 9 years, you could allow the loan to be discharged after 9 or 12 years whichever is lower.

For most people their biggest assets by size are their 1) house, 2) education, and 3) car. Given that most people finance assets, it would be very odd if the average education loan was NOT at least as big as the average car loan - and over a term between the average life of a car and the average life of a house.

For most people the more educated you are the higher your wage; therefore to maximize wage stay at school longer.Problem is that NET OF DEBT CARRY, this isn't true; as the marginal return on additional education diminishes; and the marginal cost on additional debt increases. Hence there is a sweet-spot, beyond which additional education is destructive.

The very basic issue that becomes harder to see - the more 'invested' in the system that one becomes.Hence the high number of post-grads with specialties of little commercial value, driving taxi cabs.

And where do the dollars come from that pay the salaries of faculty to do research? Undergraduate tuition. (Today it is not uncommon for star faculty to be making well over $300,000 per year with many not ever teaching undergraduates.) Much of the increased cost of undergrads going to college is the cost of the ever-greater research programs, and star faculty salaries, needed to maintain, or increase, rankings.

“Expenditures in research increased in the past few years only because universities spent more of their own funds in hopes of staying competitive in what amounts to an “arms race”. “

“the cost of doing research is not fully recoverable from sponsors. “

“Academic research would be more successful if F&A returns truly mirrored the cost of conducting research. When such cost cannot be fully recovered, the research must be subsidized through other means which eventually increases the cost of other areas in the institution.”

"..total research expenditures are more subjective rankings and reward size rather than productivity, quality, or impact."

The report doesn’t make the leap that the way you get size is more faculty teaching fewer courses, hence you need more tuition dollars either by raising enrollments with larger class sizes or increasing tuition because very little, if any, of faculty salaries come from these research contracts. The research contracts pay for research scientists, post-docs, research assistants, equipment and supplies for laboratories, travel to conferences, administrative assistants for large research programs, etc.

When I started out as an assistant professor in 1984, I needed to provide 25% of my AY salary from external contracts to teach one course. Today for no external AY I only have to teach one course. This was necessary for us to stay competitive in retaining faculty. Tuition is now completely subsidizing research by providing the salaries of faculty.

For most people their biggest assets by size are their 1) house, 2) education, and 3) car. Given that most people finance assets, it would be very odd if the average education loan was NOT at least as big as the average car loan - and over a term between the average life of a car and the average life of a house.

For most people the more educated you are the higher your wage; therefore to maximize wage stay at school longer.Problem is that NET OF DEBT CARRY, this isn't true; as the marginal return on additional education diminishes; and the marginal cost on additional debt increases. Hence there is a sweet-spot, beyond which additional education is destructive.

I don't disagree that education is a huge part of one's life and therefore the corresponding debt should reflect that. And I don't disagree with your second point on the marginal cost/benefits.

But I don't think these are the problems to address. A big issue here is pricing. The example DTEJ gave is one item (Harvard/Cooley price vs. value), another example is undergraduate tuitions within the same school. Engineering and lib arts programs are priced relatively equally, but the payoffs are not.

In what other industry do you have one asset with a higher probability of higher long-term cash flows, being priced the same as another asset with a lower probability of lower cash flows?

I don't disagree that education is a huge part of one's life and therefore the corresponding debt should reflect that. And I don't disagree with your second point on the marginal cost/benefits.

(1) The cost of learning has gone way, way down. There is much more access to information, and tools for learning.

(2) Colleges and Universities don't teach students very much. As noted elsewhere in the thread, even though students pay $60K+ to attend, colleges aren't even particularly interested in providing much in the way of educating the students. It is much more a matter of signaling.

(3) I am pretty sure that an education that is equal to or better than those of at least most schools in the country (probably even the top schools), could be provided or obtained at a fraction of the cost.

(4) I don't think there is any reason that young folks should be burdened with a large debt load when they are starting off. I think that this is part of the myths perpetuated by the higher-education industrial complex. Kids and families should make sacrifices. Don't worry about debt. College is so important, that you should take on a large debt if necessary.

Certainly, it costs something to educate young adults. However, I think it should cost much, much less than colleges are charging. Also, I think that from a pure learning/education perspective, colleges deliver very little compared to their cost.

Market price is just the point where buyer and seller agree on the 'value' of the exchange.

Harvard Law vs Cooley illustrates the value attached to prestige. Big numbers for both because its law (high prestige) - but only a little more for quality & pedigree (Harvard vs Cooley). Hence a school need only offer law and appear on the league table, there's little value-add to actually being good at it. Resembles the Toronto Maple Leafs, who haven't won a title since '67!

Engineering vs Liberal Arts illustrates the value attached to 'going to university'Big numbers for simply 'going to university' - but only a little more for programs with better prospects. Hence a school need only maximize inclusiveness, there is little little value to being commercially relevant.

Value being attached to social status, versus commercial pospects.Those other schools are polytechnics, for the trades, and we turn our noses up at them.Hence the rich plumber is socially worth less than an underemployed lawyer.

How about this partial solution? Require colleges to disclose to prospective students this ratio (and its components) by major for all majors:

average first year starting pay for the school's graduates/tuition and fees for all 4 years

I see way too many kids taking garbage majors that won't provide a decent return on their investment. Maybe disclosure would help guide prospective students not to waste money on majors/colleges where the return won't be good.

It is an inefficient market. The price of the asset (i.e. the loan amount) does not equal the discounted value of the expected future cash flows.

The reality is that colleges and lenders are selling hopes and dreams and buyers are not pricing it properly because the buyers are (1) kids or (2) parents looking out for their kids. In most cases these are not rational buyers.

We can talk about how plumbers and welders are a better price-to-value but who here is a plumber or a welder full-time? Easy for us to say.

-Higher education is a "product" available in a far from perfect market. There is a compromise that has to be drawn between the practical utility (including economic utility) component of education and the "softer" component. The balance should weigh towards concrete and practical applications and I would say that modern rich societies have done a reasonable job and the value of education has to include, at least in part, the education of values. But I wonder if the mission should not become more connected to real-life needs especially since higher education has become quite expensive. IMO the bang for the buck has come down for incoming students. For those who argue for different tuition levels vs different fields, those who graduate in high earning fields will tend to "pay back" through taxes especially if you live in a country that puts an emphasis on redistribution.

-What boilermaker describes in terms of the excess emphasis on research is interesting. In fact, I graduated from a "high-ranking" university but realized along the way that the strength in research and standing had a low correlation (likely inverse even) with the quality of the curriculum and direct teaching. However, higher education was already expensive before this shift and analysis of numbers suggests that the increased funds allocated to research in universities came from higher listed tuition fees but, over the last 20 years, the most significant source of these funds coming from higher tuition resulted mostly from a "public" transfer: decreased public direct funds to universities mostly compensated by increased public grants and tax benefits to students and their families (gradually increasing difference between listed tuition and net tuition).

-For the student debt part, various solutions are considered and SD makes good points. The numbers show that students most at risk for default are those getting accepted in private for-profit universities where, I suspect, critical and analytical skills are valued. There are some interesting parallels with the subprime episode in real estate. People were incentivized to become house owners (noble cause) through easy money, faced a period of loose conditions and then increasing interest rates and to acquire an asset that in the end was over-valued with an end-result that required public bail-outs and a "wasted" crisis. With higher education, students are incentivized to enrol (noble cause) through easy and quasi-automatic funding (in many universities apparently, the student aid office does not provide factual assistance and guidance but mostly acts as a financing agent) with increasing tightening of funding conditions after graduation when many discover that the promised value is not there. In this case also, moral hazard is alive and only likely to become more prominent over time.